Following is the speech by the Secretary for the Environment, Mr Edward Yau, at the Hong Kong - US Business Council 22nd Plenary Session on ¡§Turning Crisis into Opportunity: Green Investment and Energy Cooperation¡¨ today (April 30, Washington DC time).

Marjorie (Yang), Hank (Greenberg), Ladies and Gentlemen,

It gives me great pleasure to be back in Washington D.C. to join this distinguished gathering of the Hong Kong - U.S. Business Council. The Council has always been a close partner during my tenure as director-general of the Hong Kong Economic and Trade Office of Washington in 2001-2004. Today, it has again lived up to its pivotal role of a platform for Hong Kong and U.S. leaders to bring their minds together on issues of common interest. I cannot see a more timely topic than the one we have chosen today, ¡§Turning crisis into opportunity: green investment and energy cooperation¡¦.

The financial tsunami has left none of us unscathed. The pain runs deep, so deep that it gets many of us to rethink the question of what are the drivers of the future economy. While ¡§sustainability¡¨ has long been the buzzword in the arena of environmental protection, for the first time, we see a worldwide applause for the marriage between the economy and the green movement. A ¡§green economy¡¨ presents opportunities for investment, growth, savings, sustainability and healthy living. As the environment minister, I am more than happy to embrace this new wave, for it allows us to awaken the ¡§green DNA¡¨ in every sector of our economy, and to broaden and deepen the scope of our drive for a better environment both in Hong Kong and the region.

Today, I would like to take this opportunity to talk to you about what Hong Kong is doing in the area of green investment and energy cooperation. When I look around the world, I see startling similarities between the approaches taken by governments in their attempts to promote a green economy. In Hong Kong, following a quest on the way forward for our economic development, which involved the government and stakeholders from different business, professional and social sectors, we have recently identified six new economic pillars as the new drivers for economic growth. Environmental industries are among one of them.

Building on our ongoing efforts to promote ¡§low carbon living¡¨ in the city, the Government is in the course of rolling out a series of policy initiatives that will provide new opportunities for various sectors, ranging from energy efficiency, to electric vehicles and waste management. Take building energy efficiency as an example. With over 40,000 existing buildings and another 500 to 600 new buildings completed each year, buildings are responsible for almost 90% of our electricity consumption and about half of Hong Kong¡¦s total greenhouse gas emission. We will soon be introducing a legislation on Building Energy Codes to set out the mandatory requirements for building energy efficiency. Earlier this month (April), we also launched a HK$450 million (US$58 million) funding scheme which provides grants on a dollar-for-dollar matching basis for the stock of existing privately-owned buildings in Hong Kong to conduct carbon-cum-energy audit and efficiency enhancement works. Together with the money already assigned for government buildings upgrading, the measures will unleash about HK$1.5 billion (US$192 million) worth of business opportunities in the area of energy efficiency. This has not taken into account the opportunities generated by the hundreds of new buildings to be erected in Hong Kong on a yearly basis.

In terms of investment, we have pledged an investment of HK$30 billion (US$3.8 billion) on infrastructural projects directly related to our environmental drives in the next five years. The projects include a district cooling system for the newly developed area which housed the old airport of Hong Kong in Kai Tak, a sludge treatment facility and an integrated waste management facility with a daily capacity of 3,000 tonnes.

While the story of Hong Kong may sound similar to the case of other economies, there is one piece of it which distinguishes us from many of our fellow counterparts. That is, the scope and span of our green markets. For those of you who have followed the developments in our part of the world closely, you would have already learned about the Hong Kong-Guangdong agreement to develop the Pearl River Delta area into a ¡§green PRD quality living area¡¨. This is not only a common vision adopted bilaterally between Hong Kong and Guangdong, but also at the central government level, with the National Development and Reform Commission endorsing it as the development blueprint for Guangdong up to the year 2020. We are working with our counterparts in Guangdong to thrash out further details of collaboration under the areas of clean air, clean energy, cleaner production and circular economy. Some of the initiatives that are already in place are, for example, the HK$93 million (US$12 million) provided by the Hong Kong Government to support Hong Kong firms operating in the Pearl River Delta to introduce cleaner production measures. In line with the measure introduced by us, the Guangdong provincial government has also set aside a sum of 200 million yuan for mainland companies to enhance energy efficiency. At the municipal level, Shenzhen, Zhuhai and Guangzhou are among the cities that have followed suit by introducing similar incentive schemes. We expect to see continuous commitments in the area of cleaner production as Guangdong and the Mainland of China as a whole move to further upgrade their economic structure.

The vision of ¡§green Pearl River Delta quality living area¡¨ is underpinned by a series of measures to open market access for Hong Kong companies. And the open market environment in Hong Kong will, in turn, facilitate participation by services providers from elsewhere. There are three arrangements that are worthy of noting. First, the Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) has, under the 2008 liberalisation measures (note 1), allowed the Guangdong province to approve the qualification of Hong Kong service suppliers for setting up enterprises to operate environmental pollution control facilities in Guangdong. Our Economic and Trade Offices here stand ready to advise enterprises on how to capitalize on the opportunities provided by CEPA in accessing the mainland market. In the case of environmental pollution control facilities, we are talking about a market size of close of 1 billion population (note 2).

The second arrangement I want to mention is the recent decision by Beijing to allow Hong Kong companies to take part in China¡¦s Clean Development Mechanism, or CDM, projects. It is estimated that worldwide these CDM projects will generate by 2012 more than HK$230 billion (US$30 billion) of additional capital flow from developed countries to developing countries through transfer of CERs. As China is the largest host country of CDM projects, it is estimated that roughly HK$80 billion (US$10.3 billion) of these capitals will land in China. This arrangement, which we have managed to secure only recently, will provide Hong Kong companies with the access to this vast and fast-growing market either solely on their own or in partnership with foreign companies that are more experienced in CDM projects worldwide as well as more eloquent in the technology concerned.

The last, but by no means least important, arrangement is the Memorandum of Understanding on Energy Cooperation signed between Hong Kong and the National Energy Administration in August 2008. Apart from guaranteeing the continuous supply of nuclear electricity and increasing the supply of natural gas by the mainland to Hong Kong thus improving local air quality, the MOU also allows power companies in Hong Kong to take part in natural gas receiving terminal projects in Guangdong province.

Economies that have prospered on the sustainability principle have taught us that leadership, in terms of coming up with and pursuing bold policies, and investments are the two key factors to success. In the case of Hong Kong, we have factored in an additional element of market access ¡V not just to Hong Kong, but to Guangdong which has adopted a common vision of ¡§green PRD quality living area¡¨. In the context of the Pearl River Delta area, this is an important element which will enable the environmental services and technologies to unlock the green business opportunities in the region. More importantly, this will also be the key to unlocking a green future for Hong Kong and the region.

Thank you very much.

Note 1: Please refer to the website of the Hong Kong Government¡¦s Trade and Industry Department for further details http://www.tid.gov.hk/english/cepa/tradeservices/environmental.html

Note 2: According to the National Bureau of Statistics of China, the permanent population of Guangdong stood at 91.85 million at midnight, November 1, 2005. This is the latest information available on the website of the bureau.